A Personal Finance Guide

Saving Safely

In the current economic climate many financial institutions have struggled to maintain performance with a number of banks and building societies going bust. The increasing uncertainty surrounding a number of banks and building societies has left a number of savers wondering if under their mattress is the best place for their money!

However with the right knowledge savers can continue to make wise and profitable investment decisions without worrying that their investments are at risk. A smart way to invest funds and ensure the safety of these funds is to spread investments over a number of carefully selected banks and building societies. The reason it is essential to spread savings across various banks or building societies is to reduce the risk to your funds and ensure all funds are covered by the depositor’s compensation scheme. This government run scheme ensures that any savings that a consumer has with a financial institution are covered by up to 50,000 should the institution collapse.

Again by spreading any investments over this amount amongst various institutions will ensure all funds are covered by the scheme. When deciding which banks and building societies to invest funds into it is essential to measure their strengths and weaknesses. A good measure of a bank or building society’s security is its Fitch rating. This rating offers a score that indicates the stability of the bank based upon the available funds it has and its ability to repay funds. When looking for a Fitch rating of a bank or building society a number of financial help websites can offer such a rating along with other useful analysis.

Whichever bank or building society is chosen to invest savings in to it is essential to analyse the security of the institution along with the range of savings accounts on offer. Using a savings calculator is also a useful tool when deciding which invest product is best as it allows you to calculate the potential interest that can be earned from a particular product.